99 CENTS ONLY STORES(R) REPORTS EARNINGS PER SHARE OF $0.21 FOR THE SECOND
QUARTER ENDED JUNE 30, 2003.
CITY OF COMMERCE, CA -- July 22, 2003 -- 99 Cents Only Stores(R) (NYSE:NDN)
reported net income of $14.8 million for the quarter ended June 30, 2003
compared to $13.5 million in the second quarter of 2002.
Earnings per share was $0.21 in the second quarter of 2003, compared with
earnings per share of $0.19 in the second quarter of 2002, with an additional
1.1 million shares outstanding.
Eric Schiffer, President of the Company said, "We are pleased to report
year to date earnings per share of $0.41, in line with the First Call consensus
estimate from the outset of the year, and announce continued strong retail sales
and same-store-sales in the second quarter of 2003.
This is especially gratifying in light of our initial entry in Texas, which
was a significant milestone for the Company. The new Houston, Texas stores have
received strong initial customer support. We are also pleased to announce our
new Texas distribution center is operational and servicing our Texas stores
effectively."
Total sales in the second quarter 2003 increased 23.3% to $207.0 million,
compared to $167.9 million in the second quarter of 2002. Retail sales for the
second quarter were $195.1 million, up $39.6 million or 25.5% from sales of
$155.4 million in 2002. Ten stores opened during the latter part of the quarter,
including four in Texas.
Same-store-sales increased 9.8% in the second quarter of 2003.
Same-store-sales in the second quarter were benefited by this year's shift in
the Easter selling season from the first quarter in 2002 to the second quarter
in 2003. Same-store-sales for the first six months of 2003 increased 7.4%.
Total gross margin for the second quarter of 2003 was 40.0% versus 40.2% in
the second quarter of 2002. Retail gross margin for the quarter was 41.2% versus
41.8% in 2002. The difference is primarily due to a lower margin for close-out
merchandise and to a lesser extent due to a 35% sales growth for food related
products. Year to date retail gross margin is 41.5%, same as last year.
Eric Schiffer, President said "The gross margin for close-out merchandise
will vary over time depending upon market conditions. The shift to a higher
percent of food related items in our sales mix, while resulting in a slightly
lower gross margin, significantly helped the Company to generate higher retail
sales and same-store-sales. The Company will continue to respond to our
customers' preferences by providing quality products they need at a great
value."
SG&A was 28.9% of sales in the quarter versus 27.7% last year. Higher than
planned SG&A was due to several factors. The impact from the acceleration of the
opening of the first six Texas stores (two each on 6/19, 6/26 and 7/3), versus
the original plan of one store and pre-opening costs in Texas exceeded typical
pre-opening costs because of higher costs for management recruiting, training,
relocation, travel and advertising was about 35 basis points. SG&A was also
affected by about 10 basis points from back-weighted store openings, with 8
stores opening in the last 12 days of the second quarter, and the acceleration
of 3 stores originally scheduled for the third quarter, into late June.
Additionally, freight and distribution costs to initially stock the Texas
stores along with the Texas distribution center (DC) and extra labor in the main
California DC to service the opening inventory needs for the Texas stores and DC
had an impact of about 30 basis points. Non-capital maintenance, repairs,
supplies and systems expenses for the Texas DC accounted for about 10 basis
points. California workers compensation and related employee benefits cost
increases accounted for about 25 basis points.
The Company's tax rate has been adjusted to reflect an overall revised
effective rate for the year and year to date of 38.7% giving benefit for tax
credits, non-taxable interest, effective state tax rates and revision of earlier
estimates.
GUIDANCE FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 2003
-------------------------------------------------------
Total sales for the third quarter, including wholesale sales, are projected
in the range of $207 to $212 million. Comparable store sales are projected at 3%
to 4%. The company plans to open 12 stores in the quarter, 3 in July, 2 in
August and 7 in September, with the majority in Houston.
Gross margin on retail sales is projected in the range of 41.0% to 41.4%,
versus 41.3% in 2002. Total SG&A expenses including depreciation are projected
at 28.9% to 29.2%, versus 28.0% in 2002. The tax rate is projected at 38.7% of
pre-tax income. Fully diluted share count is projected at 73.4 million and EPS
for the quarter is projected at a range of $0.20 to $0.21, versus 71.2 million
and $0.19 in 2002.
GUIDANCE FOR THE YEAR ENDED DECEMBER 31, 2003
---------------------------------------------
Total sales for the year, including wholesale sales, are projected in the
range of $869 to $878 million. Comparable store sales for the year are projected
at 4% to 5%. The company plans to open 38 stores for the year with at least 15
in Houston.
Gross margin on retail sales for the year is projected in the range of
41.6% to 41.8%, versus 41.7% in 2002. Total SG&A expenses including depreciation
for the year are projected at 28.2% to 28.6%, versus 27.5% in 2002. The tax rate
is projected at 38.7% of pre-tax income. Fully diluted share count is projected
at 72.7 million and EPS for the year is projected at $0.92 to $0.96, versus 71.2
million and $0.83 in 2002.
99 Cents Only Stores(R), the nation's oldest existing one-price retailer,
operates 166 retail stores in California, Nevada, Arizona and Texas and a
wholesale division called Bargain Wholesale. The Company will open its
seventeenth store for the year and its first in the Northern California Bay Area
on July 31, 2003 in San Leandro. 99 Only Stores(R) emphasizes name-brand quality
consumables, priced at an excellent value, in attractively merchandised stores.
This press release contains forward-looking statements, as referenced in
the Private Securities Litigation Reform Act of 1995 (the "Act").
Forward-looking statements are inherently unreliable and actual results may
differ. Factors which could cause actual results to differ materially from these
forward-looking statements include, changes in the competitive market place,
general economic conditions, factors affecting the retail industry in general,
the timing of new store openings, the ability of the Company to identify and
obtain leases for new stores, the ability of the Company to acquire inventory at
favorable costs and other factors discussed in the Company's filings with the
Securities and Exchange Commission. The Company undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise.
99 CENT ONLY STORES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in thousands except per share amounts)
Three Months Ended June 30 Six Months Ended June 30
2003 2002 2003 2002
-------- -------- -------- --------
Net sales:
99 Cent Only Stores $195,052 94.2% $155,436 92.6% $379,764 94.1% $305,083 92.2%
Bargain Wholesale 11,981 5.8% 12,425 7.4% 23,691 5.9% 25,882 7.8%
-------- -------- -------- -------- -------- ------ -------- ------
207,033 100.0% 167,861 100.0% 403,455 100.0% 330,965 100.0%
Cost of sales 124,230 60.0% 100,298 59.8% 241,254 59.8% 199,159 60.2%
-------- -------- -------- -------- -------- ------ -------- ------
Gross Profit 82,803 40.0% 67,563 40.2% 162,201 40.2% 131,806 39.8%
Selling, general and
administrative expenses 54,251 26.3% 42,280 25.2% 105,601 26.2% 83,263 25.1%
Depreciation & amortization 5,483 2.6% 4,259 2.5% 10,617 2.6% 8,199 2.5%
-------- -------- -------- -------- -------- ------ -------- ------
Total operating expenses 59,734 28.9% 46,539 27.7% 116,218 28.8% 91,462 27.6%
-------- -------- -------- -------- -------- ------ -------- ------
Operating Income 23,069 11.1% 21,024 12.5% 45,983 11.4% 40,344 12.2%
Interest and other income
(expense), net 832 0.4% 1,211 0.7% 2,027 0.5% 2,296 0.7%
-------- -------- -------- -------- -------- ------ -------- ------
Income before income taxes 23,901 11.5% 22,235 13.2% 48,010 11.9% 42,640 12.9%
Provision for income taxes 9,065 4.3% 8,717 5.2% 18,565 4.6% 16,652 5.0%
-------- -------- -------- -------- -------- ------ -------- ------
Net income $ 14,836 7.2% $ 13,518 8.0% $ 29,445 7.3% $ 25,988 7.9%
======== ======== ======== ======== ======== ====== ======== ======
Basic earnings per share
Net income $ 0.21 $ 0.19 $ 0.42 $ 0.37
======== ======== ======== =========
Diluted earnings per share
Net income $ 0.21 $ 0.19 $ 0.41 $ 0.37
======== ======== ======== =========
Shares used in computation of net
income per share
Basic 71,038 69,888 70,754 69,726
Diluted 72,346 71,275 71,942 71,100
99 CENT ONLY STORES
BALANCE SHEETS
(Unaudited)
(Amounts in thousands)
June 30, December 31, June 30,
2003 2002 2002
---- ---- ----
ASSETS:
Cash $ 12,465 $ 7,985 $ 178
Short-term investments 107,524 146,857 117,012
Receivables, net 2,546 2,753 2,977
Due from shareholder 1,470 1,232 -
Income tax receivable 9,057 - 4,599
Inventories 94,962 83,176 78,744
Other current assets 3,722 2,869 3,504
--------- ------------- ---------
Total current assets 231,746 244,872 207,014
Property and Equipment, net 164,679 127,560 114,087
Long-term investments in marketable securities 57,158 37,223 35,045
Deferred taxes 19,078 19,078 15,688
Other assets 12,336 11,177 10,916
--------- ------------- ---------
31,414 30,255 26,604
--------- ------------- ---------
Total assets $ 484,997 $ 439,910 $ 382,750
========= ============= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current portion of capitalized lease $ 40 $ 40 $ 41
Accounts payable 16,313 16,946 7,520
Accrued expenses 8,704 10,157 7,543
Workers Compensation 8,334 7,725 6,052
Income tax payable - 3,518 -
- ------------- -
Total current liabilities 33,391 38,386 21,156
Deferred rent 2,340 2,210 2,120
Deferred compensation liability 1,563 1,102 950
Capitalized lease obligation 1,575 1,597 1,627
--------- ------------- ---------
5,478 4,909 4,697
Shareholders' equity 446,128 396,615 356,897
--------- ------------- ---------
Total liabilities and shareholders' equity $ 484,997 $ 439,910 $ 382,750
========= ============= =========
99 CENT ONLY STORES
STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
Six months ended
June 30,
2003 2002
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,445 $ 25,988
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . 10,617 8,199
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (15)
Tax benefit from exercise of non-qualified employee stock options. . . . . . . 5,801 3,122
Changes in assets and liabilities associated with operating activities:
Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207 546
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,786) (12,216)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,637) (405)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (633) (7,724)
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,453) 1,199
Worker's compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 609 518
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,575) (3,215)
Deferred rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 60
Due (from) shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . (238) (1,655)
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . 18,487 14,402
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment. . . . . . . . . . . . . . . . . . . . . . . (47,736) (18,629)
Purchases of marketable securities . . . . . . . . . . . . . . . . . . . . . . . 19,398 (3,958)
Investments in partnerships. . . . . . . . . . . . . . . . . . . . . . . . . . . 86 -
Net cash used in investing activities. . . . . . . . . . . . . . . . . . . . (28,252) (22,587)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of capital lease obligation . . . . . . . . . . . . . . . . . . . . . . (22) (11)
Proceeds from exercise of stock options. . . . . . . . . . . . . . . . . . . . . 14,267 8,142
Net cash provided by financing activities. . . . . . . . . . . . . . . . . . 14,245 8,131
NET INCREASE (DECREASE) IN CASH . . . . . . . . . . . . . . . . . . . . . . . . . 4,480 (54)
CASH, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,985 232
CASH, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,465 $ 178
NOTE TO EDITORS: 99 CENT ONLY STORES(R) NEWS RELEASES AND INFORMATION AVAILABLE
ON THE WORLD WIDE WEB AT HTPP://WWW.99ONLY.COM
CONTACT: 99 CENT ONLY STORES(R), CITY OF COMMERCE, CALIFORNIA, ANDY FARINA,
CFO, 323/881-9933 --99 CENTS --